Experts link Bitcoin’s correction to an overheated market, not to criticism of China

Recent statements by Chinese authorities and state media regarding possible mining restrictions and cryptocurrency trading have sparked some market chatter, but globally they are unlikely to affect Bitcoin’s price. Experts polled by ForkLog said as much.

According to Sergei Troshin, head of the Six Nines data centre, while China is the largest Asian country, it is one of the few to have pursued a path of prohibitions.

“China’s decision will affect the development of cryptocurrencies more locally than globally. These measures cannot radically alter the world’s attitude toward cryptocurrencies overnight, nor significantly impact Bitcoin in the long run,” Troshin argues.

The current correction in the crypto market followed an exceptionally strong rally.

“In such conditions, any event can trigger a butterfly effect. Lately, more than one event has occurred simultaneously, so it’s wrong to blame China for everything,” he added.

The most serious blow, in the expert’s view, has fallen on mining. BTC.TOP has ceased providing mining-pool services. The company is moving capacity to North America. The Huobi mining pool has begun refusing service to residents of the PRC.

“At present it is unclear what will happen to the equipment if mining halts, or how hashing power will be distributed around the world. China accounts for about 60% of the hashrate, and such a reshuffling will definitely have a short-term impact on price,” Troshin explained.

Margin traders and market newbies are usually attentive to the news noise from China, continued Grigory Klumov, founder of the STASIS stablecoins platform. Similar information attacks on digital assets have occurred in 2014 and 2017.

“Bans will indeed have consequences for market participants who break the laws in the jurisdictions where they operate. But in the long term this will only strengthen the quality of cryptocurrency industry development and lay the groundwork for future market capitalization growth,” Klumov says.

The main allies of Bitcoin have always been time and the halving, said Exante’s chief strategist Yanis Kivkulis.

“Interest in the crypto market is fairly cyclical, but each time it moves to a new high followed by a prolonged retreat in both price and overall enthusiasm. Given the current information environment, and the evident market overheating, new all-time highs should be expected later rather than sooner,” the expert says.

In his view, the recent crash has shaken out the market’s most aggressive speculators. Now it may touch those who decided to use the recent dip as a time machine to buy at January 2021 prices.

“Be prepared that the trend of buying on the dip will switch to selling on the rise. The first signs of this were seen in the failure to rise above $60,000 in early May,” Kivkulis says.

His most negative scenario is a repeat of the 2014 and 2018 episodes. Then, after a rapid drop, a rally attracted new sellers, which ended in prolonged disappointment.

“The worst thing for the crypto market now is to disappoint the optimists, which could spark a new ‘crypto-winter’. This time the circle of those affected will be wider, and it risks dragging crypto into a depression,” the Exante strategist suggested.

Kuna Exchange founder Mikhail Chobanian links the news buzz from China to the upcoming launch of the digital yuan:

“There are theories that the authorities of the PRC want to make it an analogue of USDT for the crypto world. A global CBDC. For me, this is an expected process. Everything is going to plan.”

According to Chobanian, the current situation is perfectly illustrated by the following picture:

Data: Reddit.

The Kuna founder is also bullish on Bitcoin’s price.

“Even $30,000 per Bitcoin is three to four times higher than the average in 2020,” he noted.

Gleb Kostarev, Binance Russia & CIS director, concedes that Chinese authorities’ restrictive measures were an “unexpected blow,” but market participants do not see them as a global threat:

“Despite volatility, major crypto investors believe that the current slump does not indicate any fundamental shifts in the long run. It is necessary to wait for market stabilization, which may reveal the market participants’ further mood.”

Credentia founder Stepan Gershuni, in a Facebook post, called attempts to link the fall of the leading cryptocurrency with statements by the Chinese authorities or Elon Musk ‘pretty stupid’.

Among the real reasons for the correction, he identifies three:

• overheating of the market;
• slowing growth rate (if it does not grow 10% per week, people start to get nervous and sell);
• crazy margins of margin trading and belief in the ‘endless to-the-moon’.

Gershuni believes these factors will influence the asset’s price in the coming months.

“Over the next 3–9 months there will be a grand sale. A great moment to buy your favourite cryptocurrency,” he wrote.

He also noted that a significant portion of the current DeFi market was built when Ethereum was $100. Therefore, in the coming years he expects the appearance of “even cooler products and projects.”

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